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of June 5, 2006 No. 1037-III

About approval of the Privatization program of state-owned property in the Kyrgyz Republic for 2006-2007

(as amended of the Resolution ZhK KR of February 21, 2008 No. 206-IV)

The Jogorku Kenesh of the Kyrgyz Republic decides:

1. Approve the Privatization program of state-owned property in the Kyrgyz Republic for 2006-2007 it (is applied).

2. Charge to the State committee of the Kyrgyz Republic on management of state-owned property to hold before privatization of JSC Kyrgyztelekom new transparent, open tender on selection of the Consultant for determination of its market value with broad access of mass media and the public.

3. Charge to Committee on development of industry economy, to entrepreneurship and use of natural resources of Jogorku Kenesh of the Kyrgyz Republic to review the previous decisions of Jogorku Kenesh of the Kyrgyz Republic concerning privatization and to make offers in Jogorku Kenesh of the Kyrgyz Republic on elimination of contradictions with this resolution. Specify that before their elimination the previous decisions of Jogorku Kenesh of the Kyrgyz Republic are effective in the part which is not contradicting this resolution.


Toraga of Jogorku Kenesh of the Kyrgyz Republic

M. Sultanov

Approved by the resolution of Jogorku Kenesh of the Kyrgyz Republic of June 5, 2006 No. 1037-III

The privatization program of state-owned property in the Kyrgyz Republic for 2006-2007

1. The main results of privatization of state-owned property for 1991-2005 and problems

1.1. Main results

The undertaken reforms for last years in the republic were resulted by active transformation of state-owned property, its structure and the property relations are significantly changed. In the country there was economy regulated by the market relations, the level of state-owned property in all sectors of economy, except for key branches and the social sphere considerably is reduced. Now more than 70 percent of the state objects which were available in Kyrgyzstan in 1991 are transformed to private pattern of ownership. Number of the state objects is transferred to the municipal possession.

Documents are in recent years prepared and the program implementation of privatization of the major strategic sectors of economy is begun (power, telecommunications, oil and gas industry, air transport), their assessment and the choice of schemes of privatization, restructuring and separation into independent joint-stock companies are performed.

Now the largest shareholder having controlling stocks in the companies of the specified sectors is the state.

In the course of privatization the basis for forming and development of the domestic stock market, small and medium business is created, market infrastructure in which all basic elements necessary for its effective functioning and development are provided is created. The state is exempted from big circle of functions of direct management of the companies unusual for it. "Mass" privatization during which citizens of Kyrgyzstan were allocated with privatization coupons is carried out and exercised the right to part of state-owned property. Market saturation goods and services, shortage control, improvement of service, servicing terms, etc. became result of "small" privatization. As a result of reforms on the basis of privatization of small enterprises, housing in the country there was real owner, conditions for attraction in economy of the republic of foreign and domestic investors are created.

Along with certain progress in process of privatization there was also number of shortcomings. In particular, the Audit Chamber of the Kyrgyz Republic notes incomplete implementation of the state blocks of shares of number of unattractive objects, insufficient efficiency of trust management of the state blocks of shares of some companies, need of strengthening of control of contractual commitments, charge and transfer of dividends on the state blocks of shares, by bankruptcy process.

1.2. The problems interfering effective carrying out privatization

The problems interfering effective carrying out privatization are: unattractiveness of separate objects for investors; considerable wear of the equipment; obsolete technology; lack of the markets; low product competitiveness; insufficient solvency of buyers; in a number of sluchayevnebolshy percent (remaining balance) of the state share fraction offered for sale that does not give to the buyer of full participation in management of joint-stock company. For these reasons the state, owning sufficient blocks of shares of joint-stock companies, often cannot realize them.

In a number of joint-stock companies state interests do not give the chance to sell the state block of shares completely that causes the necessity of management of these shares on behalf of the state. With respect thereto the problem of increase in effective management of state-owned property is urgent. The existing system of training on management of state-owned property, estimates of their professional qualities and determination of qualification taking into account specifics of specific object of management, and also impossibility of application of measures of property responsibility for results of activities of representatives of the state in joint-stock companies and lack of the mechanism of their remuneration depending on achievement of good financial results do not allow to pursue effective policy of management of state-owned property. Besides, enhancement of the regulatory legal base influencing processes of management of state-owned property regarding the questions concerning lease, concession, dividend policy is necessary.

Important element of privatization is assessment of state-owned property. The possibility of involvement of independent appraisers to assessment of state-owned property is limited to backwardness of institute of assessment, lack of state regulation of estimative activities and quality assurance of estimative services.

The mechanism of access and participation of small shareholders to implementation process of the state blocks of shares requires enhancement.

The questions connected with assignment of rights of property on the parcels of land constituting single complex with subjects to privatization, and their assessment are not settled.

2. Tasks of state policy in the field of privatization for 2006-2007

For ensuring process performance of privatization of state-owned property, creation of the favorable investment climate of the Kyrgyz Republic via the privatization mechanism, and also permissions of the available problems it is necessary to solve the following problems:

2.1. finish the privatization of objects begun at the previous stages;

2.2. perform improvement of insolvent business entities within bankruptcy process;

2.3. provide in the course of privatization protection of property rights and interests of the Kyrgyz Republic, along with ensuring protection of the rights and interests of investors;

2.4. perform monitoring of activities of objects with the state ownership ratio and accomplishment of contractual commitments;


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